A peaceful Swiss village that has become an unlikely rival to Mayfair is cutting its income tax rate to attract more hedge fund managers from London.

The Swiss area of Höfe in Schwyz, which includes the village of Pfäffikon, plans to cut its basic tax rate to 15% from 17% next year. It hopes to attract hedge funds that are angered by higher taxes in Britain and the public outcry against the banking industry.

Surrounded by hills and meadows, Pfäffikon is already one of the two headquarters of Man Group, the world's largest publicly traded hedge fund, otherwise based in London. The Swiss bank UBS has also recently built a base in the Alpine enclave, near Zurich.

"We know that many London-based funds are not happy with rising taxes in Britain, so this is a reminder that Switzerland and Pfäffikon are positioning themselves as a hedge fund hub," said Marcel Jouault, of the business promotion department at Pfäffikon. "Many office buildings will be completed in 2011 and 2012. Lowering taxes will attract more businesses."

Support businesses such as bookshops, travel agencies and beauty centres have proliferated. The city is also building a centre to host smaller hedge funds.

One in four hedge fund managers have moved from London to Switzerland, costing Britain's public coffers an estimated £500m in tax revenue, according to the consultancy Kinetic Partners.

The managers, mostly based in London's Mayfair area, have been furious about the new 50% personal income tax rate. Alan Howard, founder of Brevan Howard, and Mike Platt, of BlueCrest Capital, recently moved to Switzerland.

Hedge fund managers insist their moves are not only motivated by taxes, as they also seek an improvement in their lifestyles.

"We moved from London to Zug [near Pfäffikon], two years ago, but it was on a personal note, not because of the taxes," said Karsten Schroeder, chief executive of Amplitude Capital. "London is a big city, it's very noisy, busy and intense, whereas this is more peaceful. I find it a better balance, it's a quiet life."

The hedge fund community is battling against poor returns, given volatile credit and equity markets, and against forthcoming tougher regulation. A proposed EU directive is expected to impose more transparency on an industry that for years has remained mostly secretive, without having to publicly disclose their holdings. Hedge funds, which manage about $2tn (£1.25tn) globally, tend to be very lucrative as they charge 2% of the assets invested, as well as a 20% fee on any profits made.